Prime Minister Ehud Olmert is in trouble. Ever since last summer's war in Lebanon, the polls have indicated a loss of confidence in his leadership. Next month's Winograd report is widely expected to present even more problems for Olmert. In fact, many in Israel believe that the report could lead to the early demise of the Olmert government. Olmert's best chance of saving his job lies in making progress toward an agreement with the Palestinians and, ideally, the Arab world in general. Luckily for him (and for Israel) this appears to be an opportune moment on both fronts. The establishment of a Palestinian unity government and the upcoming restatement of the Saudi (or Arab League) Initiative both present the possibility of movement if that is what Olmert wants. Neither the platform establishing the unity government nor the Arab League Initiative is perfect from Israel's (or America's) point of view. Hamas has not agreed to recognize Israel or to fully accept Israel's previously negotiated agreements with the PLO. The Arab League Initiative still calls for the return of Palestinian refugees to Israel (not only to a new Palestinian state) and for an Israeli withdrawal to the June 4, 1967 borders. In the eyes of many, these defects make the proposals non-starters, not worth the paper they are written on. BUT VIEWING them that way is a mistake. In the case of the Arab League Initiative, Olmert and Foreign Minister Tzipi Livni both now say there are elements in the plan worth considering. Although they have not come around to seeing positive elements in the Palestinian unity agreement, that does not mean that there aren't any which will perhaps only be recognized when the opportunity passes. That is the story of Middle East diplomacy. Each side insists on seeing a half-empty glass completely empty. Unfortunately, given a choice between seeing the best or the worst in the adversary's position, Arabs and Israelis invariably choose the worst. Dr. Ahmed Youssuf, the political adviser to Hamas, has said that the organization has "decided to adopt a political course with the aim of achieving the same objectives for which it has been fighting by force of arms: establishment of a Palestinian state in the 1967 borders, giving the refugees the right of return and release of all the Palestinian prisoners from Israeli jails." Youssuf said "Hamas would be willing to examine the Saudi Arabian initiative in a positive light, on condition that Israel promises to honor the initiative" and added that "Hamas is ready for a hudna for 10 years, with the option of extending it." Then he warned that "If we do not succeed in reaching the achievements that we want, we will return to the path of armed struggle." As to the Hamas ideology that rejects Israel, he said, "We are willing to see changes in the ideology of Hamas in the near future. The political reality is leading to changes in some of the ideas of the movement." That may be so much hot air but, in fact, political organizations - even terrorist organizations - sometimes do change their ideologies as situations change. The PLO was, until 1988, committed to the destruction of Israel and its replacement by a Palestinian state. By 1993, it had recognized Israel, changed its covenant so that it no longer called for Israel's destruction, began negotiating with Israel and declared its acceptance of the "two state solution." Those remain its positions today. THE ARAB initiative remains one of the most promising frameworks which can be utilized to establish an Israeli agreement with the Palestinians. Until now, the Palestinian Authority has not accepted it although every Arab state in the world has signed on, pledging to establish full normalization with Israel in exchange for an Israeli pullback to the '67 lines and a Palestinian state. From Israel's point of view, the initiative's calls for the return of refugees and full withdrawal make it less than optimal. But, in a meeting with the Saudi ambassador this winter, Israel Policy Forum was told that the initiative was not a take-it-or-leave-it offer but an invitation to start a process. The ambassador told IPF president, Seymour Reich, that Israel need only agree to negotiate and Prime Minister Olmert would see how far the Arabs were willing to go. And now Hamas is saying that it too might endorse the plan, if only to ingratiate itself with the Saudis, the European Union, and the United States. Dr. Ziad Asali, President of the American Task Force on Palestine and a prominent advocate of the two-state formula believes that is very good news. Writing in a recent Washington Times, Asali said: "The new Palestinian unity government should unconditionally accept the Arab League Initiative as the first serious step toward a meaningful political process... [it is] a good starting point for negotiations between all parties interested in ending the conflict and the occupation. To bring these negotiations to fruition, Israel must accept the need to end the occupation, and the Palestinians must have a government that articulates a clear position for a two-state solution, one that says, 'we seek to negotiate an independent state along the 1967 borders to live alongside Israel in peace - no more and no less." Dr. Asali has it exactly right. WHAT IS wrong with exploring the possibilities offered by the Arab League Plan? What is wrong with seeing if there is any "give" in Hamas's position? Sure, it's easier to just say no and demand that the other side accepts various and sundry conditions. But where does that get you? Exactly nowhere. Engaging the Palestinians, under the rubric of the Saudi plan, would surely lead us to a better place. The writer is the Director of Israel Policy Forum's Washington Policy Center.